16a-4-107. (1) Except as provided in subsection (2), if a creditor contracts for or receives a separate charge for insurance, the amount charged to the consumer for the insurance may not exceed the premium to be charged by the insurer, as computed at the time the charge to the consumer is determined, conforming to any rate filings required by law and made by the insurer with the commissioner of insurance.
(2) A creditor who provides consumer credit insurance in relation to open-end credit may calculate the charge to the consumer in each billing cycle by applying the current premium rate to the unpaid balance of debt in the same manner as is permitted with respect to finance charges for consumer credit sales pursuant to open-end credit.
History: L. 1973, ch. 85, § 67; L. 2024, ch. 6, § 86; January 1, 2025.
KANSAS COMMENT, 2000
1. Subsection (1) generally limits the creditor's charge to the debtor for insurance to the premiums to be charged by the insurer. Subsection (2) authorizes convenient methods of calculating charges in open end credit transactions that might not be permitted if subsection (1) were applied inflexibly. See the Kansas comment to K.S.A. 16a-2-202 for an explanation of the various methods of determining the unpaid balance in open end credit accounts.
2. As noted in the Kansas comment to the previous section, creditors often keep a portion of the premiums as a commission. It has been argued that this practice violates the rule of this section because the amount charged to the consumer, which includes the commission, exceeds the premium actually received by the insurer. The cases to date have not accepted this argument. See Tew v. Dixieland Finance, Inc., 527 So.2d 665 (Miss. 1988); Spears v. Colonial Bank of Alabama, 514 So.2d 814 (Ala. 1987).
Attorney General's Opinions:
Consumer credit insurance; amount of insurance. 88-13.
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